Scenario 1-1

Suppose a t-shirt manufacturer currently sells 5,000 t-shirts per week and makes a profit of $10,000 per week. A manager at the plant observes, "Although the last 400 t-shirts we produced and sold increased our revenue by $4,000 and our costs by $4,800, we are still making an overall profit of $10,000 per week so I think we're on the right track. We are producing the optimal number of t-shirts."

-Refer to Scenario 1-1.Using marginal analysis terminology,what is another economic term for the incremental cost of producing the last 500 cigars?
A)marginal cost
B)operating cost
C)explicit cost
D)Any of the above terms are correct.

Question

Scenario 1-1

Suppose a t-shirt manufacturer currently sells 5,000 t-shirts per week and makes a profit of $10,000 per week. A manager at the plant observes, "Although the last 400 t-shirts we produced and sold increased our revenue by $4,000 and our costs by $4,800, we are still making an overall profit of $10,000 per week so I think we're on the right track. We are producing the optimal number of t-shirts."

-Refer to Scenario 1-1.Using marginal analysis terminology,what is another economic term for the incremental cost of producing the last 500 cigars?
A)marginal cost
B)operating cost
C)explicit cost
D)Any of the above terms are correct.

Quizplus · Accepted Answer

The incremental cost of producing the last 500 t-shirts is another term for marginal cost. Marginal cost refers to the cost of producing one more unit of a good or service. In this case, the manager is referring to the costs incurred from producing and selling an additional 400 t-shirts, which is an example of marginal cost analysis. Therefore, the best choice is A.

Scenario 1-1 Suppose a T-Shirt Manufacturer Currently Sells 5,000 T-Shirts Per Week